Follow up on the Solar discussion from an Installer

[Spartacus]

IF AND ONLY IF they are able to get any of the money back.
Let us say house A sold for $320k and house B sold for $320k. If they are identical make, model, floorplan, condition, etc., and the only different was that house B had solar panels then, if you were the appraiser, what would you opine the adjustment for solar panels to be?

What if the solar panels were visible from the street and house B sold for $315k?

I think the increase in value should be based on the size of they system and on the useful age remaining on the guarantee.

There is a huge difference between a system that offsets $100 and one that offsets $200. There is a difference between a 5 year old system that is still putting out 95% of is power to one that is 15 years old and only putting out 85% of its power. So a listing of "This house has Solar!!" Is useless. Does that mean solar water or electricity? A listing of "this house has an 11k kilowatt solar system able to off set $250 in electricity bills and is guaranteed for 20 years" would be significantly more helpful.

 

[Cigar]

Spartacus:

How does one know if the panels are Chinese or domestically produced? The number of $20,000 is being thrown around here, all the solar installations I see here in the Bay Area are running in the $70,000 neighborhood. I read an article about German solar installations recently but can't find it now, it said that Germans have a choice of cheap Chinese solar panels or more expensive domestically produced solar panels, in looking for it I did come across this:

Popularity of solar cells has resulted in overproduction, which has caused retail costs to plummet, and now China intends to cut prices even more, which has led to much speculation among industry leaders in the US and Germany.

According to Reuters, a solar system below 10kw would cost about 3,400 euros in Germany, and more than $70,000 in the US.

Now the US faces the tough task of trying to encourage consumers not to purchase more affordable solar energy products from China.¹

Do we have any domestic solar industry at this point? Solyndra built a huge new manufacturing facility in Fremont with stimulus funds, Obama visited it and touted American production, they have now closed it down and moved all production to China to compete.


¹ http://www.redorbit.com/news/science/1748434/us_germany_engaged_in_pricing_war_for_solar_panels/

 

[Meandering]

You can play with the numbers all you want, means nothing. Buyers don’t walk around with calculators when they are purchasing homes. Some may do some of the math later when they’re back at their home, but the accuracy of the knowledge of what to compute varies tremendously.

The value or potential for value and the savings, real or imagined, of solar energy is going to differ in every part of the country.

Here, most buyers recognize that roofs are going to need to be replaced about every 20 years or so, and that it will snow, and that it will rain and that it will sleet and hail more so than in southern California or more arid regions.

So when buyers look at the roof and see moss growing in the shade of the solar panels or leaves collecting against the stand-offs that hold the panels, they start to think the shingles will not last very long and that they will need to get up there and remove the debris so that rain and snow melt can properly drain from the roof. No numbers needed, just looking at roofs with solar panels tells anyone it is going to be more expensive to repair or replace the roof because the solar panels are there. Solar will not release them of getting a bill from the electricity company, so there will always be, at least, the baseline electric bill. So even if they have optimal sunlight and production of the solar panels, you’re saying they could save $100 or $200 a month on their electric bill. Well, for $100 a month in savings, that’s like #3.33 a day. Or, at current prices, 1 gallon of gasoline a day, or less than a package of cigarettes, or less than have the price difference between steak and chicken. And that’s provided the tax assessment isn’t higher because of those solar panels. Well, for about $30 they could go to the hardware store and get a water heater timer and save just about that much by only heating their hot water a few hours a day, if they have an electric water heater.

I know of three homes here that were sold with solar panels and shortly after the sale the buyers removed the panels and did not replace them.

 

[prasercat]

It is obvious to all here that I don't know my butt from a hot rock when it comes to appraising so my opinion on these listing would most likely be irrelevant. (If you have all this info in an excel spreadsheet I might be able to do something with it).

My biggest observation right up front is .... half of the homes built were built with solar and over the last 10 years ..... only 35 of them have been put up for sale as compared to 303 of the non solar home up for sale? That tells me there is something about a solar home people don't want to part with.

The reason you can't just have set numbers representing acceptance is because there are so many variables which will alter acceptance:

The acceptance of solar should have correlations to demographics; such as, age, income level or discretionary income, political bias in the region (if you live in the oil state of Texas, you may find it to be "Anti-American" to have solar panels and neighbors may actually throw rocks at your house). It will likely depend upon location: Average days of sunshine, latitude, existence of trees, buildings or other obstructions (even a mountain side can cast shadows over a large area), local and State tax incentives or credits. The neighborhood acceptance or even a variant of that - "Keeping up with the Joneses". The cost of electricity in your particular area (some areas have much more local power generation from Dams, etc.). Fuel and power price trends and shortages: The steeper the price trend or greater uncertainty in future in energy prices, the greater the need to insure oneself from uncertainty and the more attractive the payback will appear.

Although people can just lease solar installations now, without purchase or maintenance, it may be that those that purchased systems in the past tended to be older and more affuent individuals that were statistically less mobile, more settled and could on average see a greater return with a solar installation than someone that was only planning to stay in their home a short time or a few years. This may explain a great deal of what you are seeing about retention/low sale rate for those that purchase solar installations.

Oversimplification is great for "Sales", but when it comes down to "Consulting", you need to understand the intricacies of reality and not just a positive one-sided sound bite. Appraisers aren't selling anything (except their expertise), they are advising and a true advisor needs to have a grip on reality. Any "Piece of truth" derived from a narrow situation is just misleading when touted as a "Whole truth". Not surprising that this is also the most popular tactic employed in political battles, because after all, politics is selling (it's rarely about the truth).

 

[Lee Lansford]

I think the increase in value should be based on the size of they system and on the useful age remaining on the guarantee.
...





I think the "increase in value" should be based upon analysis of the market sales of dwellings which are similar except for some having solar-power and some not.

And...let's look at re-sales, not the differences in costs to construct for two built to specification dwellings (one w/solar, the other not).

 

[PropertyEconomics]

IF AND ONLY IF they are able to get any of the money back.
Let us say house A sold for $320k and house B sold for $320k.

The math that you present is entirely based on the complete return OF the investment at one time and it does not consider at all both the return of and return on during the time the owner held the property.

Its a very narrow approach that is most probably incorrect .... but I understand how so many get there .. they dont understand savings is cash flow.

As Michigan CG points out it is making a difference in the commercial market and I believe that is for two reasons ... first of which is that purchasers / investors / tenants recognize value and savings ... secondly appraisers in the commercial segment understand cash flow ... I further believe that purchasers, in many instances in residential, understand the value in savings ... unfortunately the vast majority of residential appraisers do not because they do not understand cash flows. Its not a stab against residential appraisers .. its recognition that the skill level of the residential appraiser needs to be elevated which I suggested in a prior post.

Marion says buyers do not walk around with calculators .. I completely disagree in this instance. Savings are savings and yes buyers do care and yes they do put pen to paper ..... in many many instances buyers understand ... and those buyers should be interviewed by appraisers but seldom, if ever, are.

 

[Elliott]

OP hasn't been able to handle my two posts, so........

Beam me up Scotty, no intelligent life down here.

 

[PropertyEconomics]

Spartacus:

How does one know if the panels are Chinese or domestically produced? The number of $20,000 is being thrown around here, all the solar installations I see here in the Bay Area are running in the $70,000 neighborhood. I read an article about German solar installations recently but can't find it now, it said that Germans have a choice of cheap Chinese solar panels or more expensive domestically produced solar panels, in looking for it I did come across this:



Do we have any domestic solar industry at this point? Solyndra built a huge new manufacturing facility in Fremont with stimulus funds, Obama visited it and touted American production, they have now closed it down and moved all production to China to compete.


¹ http://www.redorbit.com/news/science/1748434/us_germany_engaged_in_pricing_war_for_solar_panels/

Cigar ...

Determining where the solar panels are produced is not difficult at all ... one must simply ask or order from a domestic company.

Finally, and I have no experience in your market, but $70,000 for a residential installation seems about two to three times the amount we are experiencing in our market. Most systems here will approximate $20,000 - $30,000 depending upon size of the installation.

Obviously markets vary ... as would the analysis.

 

[PropertyEconomics]

You can play with the numbers all you want, means nothing. Buyers don’t walk around with calculators when they are purchasing homes. Some may do some of the math later when they’re back at their home, but the accuracy of the knowledge of what to compute varies tremendously.

The value or potential for value and the savings, real or imagined, of solar energy is going to differ in every part of the country.

Here, most buyers recognize that roofs are going to need to be replaced about every 20 years or so, and that it will snow, and that it will rain and that it will sleet and hail more so than in southern California or more arid regions.

So when buyers look at the roof and see moss growing in the shade of the solar panels or leaves collecting against the stand-offs that hold the panels, they start to think the shingles will not last very long and that they will need to get up there and remove the debris so that rain and snow melt can properly drain from the roof. No numbers needed, just looking at roofs with solar panels tells anyone it is going to be more expensive to repair or replace the roof because the solar panels are there. Solar will not release them of getting a bill from the electricity company, so there will always be, at least, the baseline electric bill. So even if they have optimal sunlight and production of the solar panels, you’re saying they could save $100 or $200 a month on their electric bill. Well, for $100 a month in savings, that’s like #3.33 a day. Or, at current prices, 1 gallon of gasoline a day, or less than a package of cigarettes, or less than have the price difference between steak and chicken. And that’s provided the tax assessment isn’t higher because of those solar panels. Well, for about $30 they could go to the hardware store and get a water heater timer and save just about that much by only heating their hot water a few hours a day, if they have an electric water heater.

I know of three homes here that were sold with solar panels and shortly after the sale the buyers removed the panels and did not replace them.

Perhaps the things you say are appropriate in your market Marion .. but your bolded statement above could not be farther from the truth in New Mexico .... with adequate solar production the property owner recieves NO payable electric bill and in fact receives a check in the mail every month for the excess they produced. My understanding is the typical check can approximate $90 - $135 per month with the savings of not having to pay an electrical bill on top of the actual cash amount. I believe your bias on this topic is such that you should educate yourself a lot more regarding net metering, solar production, and the actual savings a homeowner will recieve. I not mean to be rude but you are simply stating things as fact that are not correct.

In southern New Mexico we have what are known as Net Zero homes ... where the property owner pays absolutely ZERO energy costs. The home is so energy sufficient that all electricity, heating, cooling, and hot water are produced by the home itself ... yes they do exist and they do work.

Im a bit shocked at the verboseness of your posting .. for some of what you say is simply not true.

 

[Elliott]

PE,
So how do Zeros compare to non-zeros? There's your market's reaction.
Its not RO = YE - M (YE + P(1/S n - RM) +/- Δo (1/Sn ).